All Forum Posts by: Brent Coombs

@Micaela N. Wolfe, You've found the right website, so that's a good start.  Welcome to BP.  Good luck...

@Sam Fickel, the OP is already buying their next home, the question being: Should they rent out their current Condo, or sell it?  ie.  Your "what if" is the opening point!  Cheers...

How much of your recent Refi went straight into capital improvements?  Or put another way:  How much would your Condo be worth if you hadn't spent anything on improvements?  ie.  How much of that value represents pure capital gains?'

In short, I reckon the pure capital gains component plus improved value beyond what those improvements cost will roughly be your ROI. Is the answer $100k, or more, or less?

If you wait more than 3 years to sell, Capital Gains Tax will enter into that equation.  But arguably, if you don't sell now, why would you ever sell it (being an investor and all)?

I'm not a Tax Accountant, but in future, you should include the cost of one in your decisions.  Cheers...

@Jonathan Hudak, has your wife been encouraging of your "interest in RE investing for a few years" (or, was she unaware of your interest)?  The point being: how else would you RE-invest the circa $100k you would net from selling your condo?

My guess is your wife would just want you to borrow $100k less on your new purchase?

In which case, you both need to talk in order to be on the same page going forward.

Both options have good upside.  Congrats on your progress to date.  Good luck...

Same principle as when you buy a home using a Bank mortgage.  If you increase it's value by renovating etc., the Bank gets the benefit of its increased value until you pay out the loan.  In the case of Owner Financing, the Owner is the Bank.  

So, if you're the Buyer, no different than if you had taken out a normal Bank mortgage. 

ie.  There is no Seller "leveraging the equity" based on value increase (or decrease). 

Makes sense?  Welcome to BP.  All the best...

@Lee Ratner, Dan wrote that appreciation in San Diego has gone up ~24% in just the last year.  That's not to say it'll increase the same amount over the next year, but certainly such gains cannot be said of many random OOS markets that might tempt you with cheap entry prices.  And, it's not to say that every property in San Diego has gone up by 24%.

Lucia brought up the excellent point that if you don't buy your own home where you want to live and can (just) afford (with house hacking), you'll end up paying high rent (to someone who is already enjoying wonderful capital gains achieved over recent years).  Where will that leave you in years to come?

In any market, there are bargains to be found.  That is what you should look for, always.  

I suggest: find a "bargain" in San Diego to start with, rather than OOS.  Good luck...

@Jose Cortorreal, does this mean you have not visited/viewed these units (and especially the neighborhood) at all?  Sheesh!...

@Jose Cortorreal, do you have pics of the 6 inhabited units?  Your homework should include what your actual finance terms will be.  ie. I'd be very surprised if you can get 3.5% fixed for 30 years - for a commercial loan.  ie.  Already, your $2,030/m cash flow is - not.

Other annoyingly costly factors that will come into play are: Vacancy Rate (never think it'll be zero, even if it is now; deduct say 8%/m); Maintenance/Cap Ex (should allow say 15%/m).  Your "small cosmetic rehab" may end up being overly optimistic, and, because the pictured home looks to require substantial capital outlay, this will also factor into lessening your returns initially); and Property Taxes and Insurance(?)

Anecdotally, anywhere that can gross more than 2%/m returns is problematic regarding neighborhood amenities and schools, which is likely why the Seller is not being bombarded with higher Offers.  Good luck.  Cheers...

@Paul Klempner, either way, you may not be offered more than around $50k against it by Lenders. Yes, that's enough of a deposit to borrow another say $150k (unless you're really gung ho and want a ~95% primary mortgage), but then that brings into focus your DTI as it relates to how much income you'll derive out of your newly refinanced ~$335k investment loan - together with your yet-to-be-approved hefty new primary mortgage debt.

For your sake, I hope you already have very good assured income.  Good luck...

@Jake Brockway, most of the "house-hacking" stories I've read encourage buying duplexes up to quadplexes, rather than renting out rooms in a single family residence.  I've seen enough Judge Judy to know that renting out single rooms against Zoning Regulations is fraught with danger (not least of which are Tenant-related personality/behavioural issues).

Time to think multi instead?  Welcome to BP.  Good luck...